Telford Homes (TEF) has recommended a cash takeover offer from CBRE, which the board said reflected the challenging market and short-term hit to profitability from its shift to build-to-rent. The bid values the housebuilder at £267m or 350p a share – an 11 per cent premium to the undisturbed share price and 21 per cent above the three-month average prior to the offer’s announcement. Shareholders on the register at the close of business on 7 June will also be entitled to the 8.5p final dividend.
In February, the Alternative Investment Market (Aim)-traded group was forced to warn that profits for the year to March 2019 would be lower than the previous year due to a subdued London market and construction delays. The housebuilder subsequently accelerated its shift towards the build-to-rent sector, which accounted for 31 per cent of revenue last year – up from 21 per cent in the prior year – and 70 per cent of the development pipeline.
The board said it had considered “the longer-term structural reduction in profit margins inherent with the move to be more focused on build-to-rent”. While the build-to-rent market is less capital-intensive than the London residential development market, this would take time to be reflected in the group’s trading performance, management said, and risks from a slowdown in the Buy to Let and owner-occupied market persisted.
Discussions with investors had also revealed that Telford would be required to take longer-term equity stakes in developments and become more involved in the management and leasing of rental properties, which could require additional financing.
The offer – which requires 75 per cent of shareholders to accept – has already received irrevocable undertakings representing 3.86 per cent of the group’s share capital.
